For several years until recently, the energy giant Bishop (LSE: BP) He was known as a good supply of passive income. This is money with minimal effort, especially from my dividend experience.

More precisely, in about five years to the fall of oil prices at the beginning of 2020 routinely brought over 7%. By the end of 2021, BP’s dividend performance was below 5%on average. He remained on the bottom side of the latest historical medium, because the company pumped resources to energy transition programs.

However, coinciding with a strategic reset back to oil and gas, analysts forecast the constantly growing dividend performance. Strong earning forecasts are based on this.

What are the forecasts?

BP paid a total dividend in 2024 from 31 cents, which was set at a sterling equivalent of 24 pence. At the current price of the operation of 4.34 GBP, this gives a dividend profitability of 5.5%.

This already contrasts very favorably with the current average 3.4% dividend performance FTSE 100.

It is also more than the current “risk-free rate” (10 years of profitability of government bonds) is 4.6%.

However, analysts forecast that BP will raise the dividend to 24.6 pence this year, 25.5 pens next year and 26.6 pens in 2027.

This would generate the appropriate capacity of 5.6%, 5.8%and 6.1%.

How much passive income can you get?

Investors, taking into account 11,000 GBP (average savings in Great Britain) in 6.1%of BP, would earn 671 GBP in the first year’s dividends. Over 10 years will raise to 6710 GBP and over 30 years to 20 1330 GBP.

However, by reinvesting dividends back to the action – “connecting dividend” – these amounts would raise dramatically.

Performing this at the same average capacity 6.1% would bring 9 213 GBP, not 6710 GBP. And after 30 years on the same basis it would raise to 57 256 GBP instead of 20 130 GBP.

Taking into account the initial investment worth 11,000 GBP, Holding BP would so far be worth 68 256 GBP.

And this will pay 4164 pounds annually to passive income from dividends a year.

What about the benefits of share prices?

I always like to buy passive stocks of income that are undervalued. This reduces the chance of losing if I ever want to sell them. And vice versa, it increases the chance of making a profit in such an event.

The key driver at the share price of each company – and its dividends – is the raise in profits.

The risk for BP is all eternal bears at oil and gas prices.

After saying, the forecasts of consensus analysts consist in the fact that his earnings will exceed the huge 29.9% each year by the end of 2017.

These numbers are reflected in the analysis of the discounted monetary flows BP share prices. This valuation model indicates that any shares should be valued, based on cash flow forecasts for basic activities.

In the case of BP, it shows that the shares are 51% underestimated at the current price of 4.34 GBP.

Therefore, their fair value is 8.86 £.

My view of the investment

A few years ago I bought shares, based on its high efficiency, sturdy prospects for the raise in profits and deep discounts to fair value.

In recent years it was a bumpy ride, but in my opinion all these factors are good again.

Therefore, I will soon buy more shares.